RBI increases Repo rate by 50 basis points
The RBI Governor has announced to increase the repo rate after the MPC meeting which lasted for three days (September 28 to September 30). RBI has announced a 0.50% hike in the repo rate. Now the repo rate of RBI has increased from 5.4% to 5.9%. Earlier in August, RBI had increased the repo rate by 50 basis points. In the MPC meeting held in May also, the repo rate was increased by 50 basis points to 4.90%.
How will the hike in repo rate affect your loan EMIs?
All loans will become costlier due to increase in repo rate. Actually repo rate is the rate at which RBI provides loans to other banks. In contrast, reverse repo rate is the interest rate that the central bank pays to the banks on keeping money with the RBI. Therefore it is generally believed that if RBI reduces the repo rate then banks will reduce the interest rate and if RBI increases the repo rate then banks will increase the interest rate. This will make the loan available to the common man expensive.
This is the fourth straight hike by the RBI after it started raising interest rates this year
The Monetary Policy Committee (MPC) in its meeting today has decided to increase the policy repo rate under the liquidity adjustment facility (LAF) by 50 basis points to 5.90 per cent. Let us tell you that after an unexpected increase of 40 basis points in the repo rate in May, the RBI has increased the repo rate by 50 bps in the months of June and August. In this way, this is the fourth consecutive increase made by RBI.
World’s other central banks too have increased rates
The RBI started raising policy rates in May in view of rate hikes by other central banks of the world. Retail inflation in India has been running above the Reserve Bank of India’s upper tolerance band of 6 per cent in August as well. The country’s retail inflation consumer price index (CPI) broke out of a three-month downtrend and stood at 7.00 per cent in the month of August. In July it was 6.71.
